Are PE Firms Finding It Harder to Exit?

Deal Journal - WSJ.com, December 10, 2007, 10:13 am
Are PE Firms Finding It Harder to Exit?
Posted by Stephen Grocer
Saying goodbye seems to be getting more difficult these days.
It has been well documented here at Deal Journal — as well as most other financial publication — that the past four months have been a trying time for private-equity firms to make acquisitions. The data also suggest firms are finding it harder to exit the businesses they do buy.
World-wide volume for two private-equity exit strategies — secondary buyouts and trade sales — have been depressed the past four months, according to Dealogic. Secondary buyouts are the sale of a PE portfolio company to another buyout shop; trade sales occur when a private-equity firm sells a company it owns to another company in the same field. (And for those wondering about IPOs, The Wall Street Journal pointed out a few weeks ago that the IPO market may be becoming less hospitable to private-equity firms.)
Granted, this isn’t all that surprising. After all, the turmoil in the credit markets has hampered buyout firms from making acquisitions and whether it is a PE firm or company on the selling side wouldn’t affect that. Still, it is interesting to note the correlation.
For both global private-equity deal and exit volumes, each of the past four months rank among the five lowest monthly totals of the year, according to Dealogic. November’s exit volume from secondary buyouts and trade sales was the lowest of the year at $13.2 billion, down almost 75% from the high of July. The last month to witness lower volume from secondary buyouts and trade sales was September 2006.
Four months did come in lower than November in terms of world-wide private-equity deal volume, though November buyout volume was down 83% from its peak in May.